Strategic Considerations In U.S. Copyright Litigation


Copyrights can be among a company's most valuable intellectual property assets. In order to realize the benefits of these assets, a copyright owner must make intelligent choices as to how best to protect and enforce copyrights against potential infringers. And parties who are accused of copyright infringement need to know the nature and scope of defenses available to them. Copyright infringement litigation can be expensive and time-consuming, so the best business decisions as to whether and how to proceed in litigation should be based on a solid understanding of the strategic choices both copyright plaintiffs and defendants have at each stage from pre-litigation through trial.

I. WHAT COPYRIGHT PROTECTS

A. The Subject Matter of Copyrights

A copyright is a form of protection provided by the laws of the United States to the authors of "original works of authorship." The subject matter of a copyright may include literary, dramatic, musical, dramatic, graphic and artistic works as well as other kinds of intellectual property. Advertisements, original labels, customer lists and other items that are used in commercial enterprises but not usually considered "artistic" are nonetheless eligible for copyright protection. Computer programs may be the subject of patent rights as well as copyrights.

Copyright protection is not available to certain kinds of materials. These include works that have not been fixed in a tangible form of expression (for example, choreographic works that have not been recorded), titles, names, short phrases and slogans, familiar symbols or designs, or mere listings or ingredients or contents. Works that consist entirely of information that is common property and which contains no original authorship, such as standard calendars, may also not be the subject of a copyright.

It is important to note that copyright does not protect ideas, procedures, methods, systems, processes, concepts, principles, discoveries or devices, as distinguished from a description, explanation, or illustration. Similarly, copyright protection does not extend to aspect of works that amount predominantly to functions, that is, to functional works. See 17 U.S.C. 102(b). However, other laws may provide protection for this other kind of intellectual property, including, patent or trade secret law.

There are common misunderstandings about how a copyright is secured. Copyright protection subsists from the time the work is "created." That is, the copyright of an original work immediately becomes the property of the owner who created it, except in certain cases, such as where there is a "work made for hire." A work is "created" when it is fixed in a copy (that is a material object from which a word can be read or visually perceived) or phonorecord (a material object embodying a fixation of sound, such as a compact disc), for the first time. Further, under the current law, the 1976 Copyright Act, it is not necessary that a publication occur (i.e., the offer to distribute or a distribution of a copy of the work to the public by sale or lease) in order to obtain a federal copyright.

B. The Exclusive Rights of a Copyright Holder

Under the Copyright Act of 1976, the initial owner of a copyright generally has the exclusive right:

  • To reproduce the work in copies or phonorecords;
  • To prepare derivative works based upon the work;
  • To distribute copies or phonorecords of the work to the public by sale or other transfer of ownership; or by rental, lease or lending;
  • In the case of literary, musical dramatic, and choreographic works, pantomimes and pictorial, graphic or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the work publicly;
  • In the case of sound recordings, to perform the work publicly by means of certain digital audio transmissions.

Certain authors of works of visual art also have the rights of attribution and integrity.

The violation of these rights constitutes copyright infringement, subject to certain limitations set forth in the Copyright Act.

C. Copyright Protection and Registration

Just as a copyright exists once an original work is created, regardless of whether or not it is published, the exclusive rights of the copyright owner also exist irrespective of whether or not he or she has claimed a copyright by using a © or registering the work with the United States Copyright Office. Although the 1976 Copyright Act did require notice, this requirement was eliminated when the United States adhered to the Berne Convention, effective March 1, 1989. Providing notice of a claim of copyright for works created after this date is nevertheless useful because it informs the public of a copyright and identifies the owner and year of first publication. If a work is infringed, a proper copyright notice may help defeat an innocent infringement defense, which could be used to mitigate actual or statutory damages.

A copyright is strengthened by registration with the United States Register of Copyrights. A copyright registration is a legal formality intended to make a public record of the basic facts of a particular copyright. Registration provides several clear benefits to the copyright owner, including:

  • It establishes a public record of the copyright claim;
  • It is a prerequisite for filing an infringement suit in federal court for works of U.S. origin;
  • If made within 5 years of publication, it will establish prima facie evidence in court of the validity of the copyright and of the fact stated in the certificate, and thereby make it easier to bring an infringement claim;
  • To obtain statutory damages and attorney's fees it is required that registration be made within 3 month after publication or prior to an infringement of the work. Otherwise, only an award of actual damages and profits is available to the copyright owner.
  • It allows the copyright owner to record the registration with the U.S. Customs Services for protection against the importation of infringing copies.

Copyright registration is one of the most cost effective means of strengthening copyright protection. The application process is simple, almost deceptively so, as there are various possible traps for the unwary that could affect the validity and scope of the registration, even if it successfully issues. Registration of a copyright is effective on the date the application is received by the Copyright Office, contingent upon actual issuance of the registration. A knowledgeable copyright attorney can assist a copyright owner in obtaining a registration in less than a year and for a modest cost. Moreover, it is possible to expedite the application process so that registration issues within weeks.

The term of the registration depends on when the work was created. For works created after January 1, 1978, the duration is the life of the author plus seventy years. If the creator is a corporation, then the term is ninety-five years from publication or 120 years from creation, whichever is shorter. For works subject to the 1909 Copyright Act, the copyright has a term of twenty-eight years, renewable for a second term.

II. ENFORCING YOUR COPYRIGHTS

A. Pre-Litigation and Litigation Strategies

1. Prelitigation Considerations

Before initiating litigation or any other enforcement tactic one should carefully consider whether it makes sense to proceed against a particular target and, if so, how and where. A copyright plaintiff may have a choice of enforcement mechanisms, including cease-and-desist letters (which can open the door to negotiations), alternative dispute resolution, or actual litigation. Which approach is most appropriate depends on the particular facts and circumstances of each case, balanced against the realistic chances of achieving the desired remedies that may be available either in litigation or in some alternative procedure.

If litigation is the desired approach, the copyright plaintiff may have a choice of forums. For instance, copyrights may be enforced in a lawsuit in federal district court, where the full panoply of remedies for infringement is available - from pretrial injunctions to monetary damage awards. However, in some circumstances, another forum may be the best choice. The International Trade Commission, for example, can decide issues of copyright validity and issue orders to prevent the importation of infringing goods into the U.S., which can be a powerful remedy.

2. Where Can You Sue?

A copyright plaintiff in federal district court will need to make sure that the court has personal jurisdiction over the target defendant and that venue is proper. Personal jurisdiction will typically be found when the defendant resides or is served with process. Jurisdiction may also be established in any district where an infringing article or product is sold. Venue will be proper in any district where the defendant resides or where it is subject to personal jurisdiction.

B. The Benefits, Risks and Costs of Litigation

1. The Costs and Uncertainties of Litigation

Any copyright owner must enforce his rights or else risk the possibility of losing them. However, the costs and risks of litigation in federal court must be seriously considered before filing suit. A prospective plaintiff should realistically assess whether the costs and business disruption inherent in litigation outweigh the perceived benefits, particularly if monetary remedies may not be readily available or may not be extensive. And a copyright owner should be aware that there is no guarantee that a judge or jury will see things the same way a copyright owner does. Copyright cases are highly fact-specific and the legal standards for copyright infringement are potentially ambiguous. For instance whether a particular work is "substantially similar" to a protected work is generally considered to be a question of fact for a jury. Because of this, a judge may not grant summary judgment before trial, and a full pretrial discovery and trial may be necessary.

2. Declaratory Relief and Counterclaims by Defendants

A plaintiff should never assume that the threat of litigation or the filing of a copyright infringement lawsuit will force an adversary to give up or settle immediately. It is not unusual for a target in a copyright infringement dispute to file a "declaratory relief" action first when threatened by a lawsuit, thereby allowing it to pick a court that is convenient to, or otherwise beneficial to, the target -- and not necessarily to the plaintiff. And most defendants in copyright infringement litigation will counter-sue, attacking the validity of the copyright and, perhaps, adding counterclaims for antitrust or other unfair competitive practices.

3. Defenses to Copyright Infringement

A defendant may argue that it is not liable for failure of an essential element of an infringement claim, for instance, by claiming the matter is not copyrightable or is in the public domain. The defendant also has available a variety of legal and equitable defenses, including parody and fair use, which may limit or preclude entirely the enforcement of a copyright lawsuit against it.

4. Indirect Liability

The copyright laws provide for liability for indirect or vicarious liability against those who aid or facilitate copyright infringement, as well as for direct infringement. For example, this was one legal theory that the record labels successfully argued against Napster in the copyright lawsuit over its MP3 music file sharing system.

III. REMEDIES IN COPYRIGHT LITIGATION

The Copyright Act sets forth various remedies available for infringement, including both legal and equitable remedies. These provisions are generous and are designed to encourage and protect original works and copyright owners' rights. The remedies also create an incentive for early registration of a copyright.

A. Provisional Remedies: TROs, Preliminary Injunctions, and Seizure of Goods

Copyright infringement often requires immediate redress, for example, to avoid the launch of a counterfeit software product or the impending sale in the United States of imported infringing goods. The Copyright Act provides various provisional remedies that protect copyright until a full trial on the merits can be held.

A temporary restraining order (TRO) may be obtained from a court with minimal notice requirements to the opposing side. A TRO will issue only in limited cases where imminent and irreversible harm to a copyright owner will result in the absence of immediate court intervention. If a copyright owner makes a sufficient showing to obtain this drastic relief, a court has broad powers to fashion an appropriate remedy, which may include not only prohibitions against the alleged infringer, but also requirements that the infringer perform affirmative acts. A TRO has limited duration, and is usually issued along with the setting of a hearing on a motion for a preliminary injunction, when a more complete showing of the need for continuing the temporary relief must be made.

A preliminary injunction is another form of temporary relief, although of longer duration. Preliminary injunctions typically last until after trial, when a final judgment on the infringement claim is rendered. In order to obtain a preliminary injunction, a copyright owner generally must prove:

  1. irreparable injury;
  2. likelihood of success on the merits; and
  3. that the harm to the plaintiff in denying the injunction outweighs the harm to the defendant in granting the injunction.

If a strong case of infringement is made, sufficient irreparable injury will be presumed to support a preliminary injunction, since copyright infringement by its nature is considered to constitute "irreparable harm." Because a significant wait will be viewed as belying the argument that the harm is irreparable, a copyright owner must act quickly if it wishes to seek a preliminary injunction. The issuance of a preliminary injunction has a potent effect on litigation because it stops the infringing activity and often results in an early resolution of the case.

Another powerful remedy for copyright infringement is seizure and impoundment of the infringing material. The offending works themselves, as well as plates, molds, and so forth, from which the infringing works may be reproduced, may be impounded at the discretion of the trial court and on such terms as the court deems reasonable. When impounded, the offending articles are sequestered during the litigation. They may be destroyed or be delivered back to the plaintiff upon final order of the court.

B. Remedies After Judgment: Permanent Injunctions, Monetary Damages, Statutory Damages

Once copyright infringement is found, a court has the discretion to issue a permanent injunction to "prevent or restrain infringement of a copyright." Such an injunction may be served anywhere in the United States and is enforceable by a contempt proceeding in any United States court with jurisdiction over the person or entity involved.

In addition to equitable remedies such as permanent injunction, the successful copyright owner is entitled to recover actual damages and "any profits of the infringer that are attributable to the infringement and not taken into account when computing damages." Only profits attributable to the infringement are recoverable, although even indirect profits may be recoverable. Apportionment must sometimes be made between profit gained from the act of infringement and profit based on other factors.

The Copyright Act requires that a successful copyright owner meet only a minimal burden of proof in order to trigger a rebuttable presumption that the defendant's revenues are entirely attributable to infringement. That is, to prove his right to profits, a copyright owner need only present proof of the infringer's gross revenue. An infringer then has the burden of proving expenses which should be deducted from the illicit profits.

Although there is no provision for trebling of damages, as in patent infringement, the copyright owner can benefit from the Copyright Act's provision for automatic, statutory damages for infringement. Statutory damages are damages which a copyright holder may elect to recover in lieu of actual damages and profits. The amount of statutory damages ranges from $500 to $20,000 per infringed work. It is possible to recover multiple statutory damage awards if multiple infringements are proven.

Statutory damages are available only for registered works. Further, the date of registration as compared to the date of infringement is important in determining the availability of statutory damages. Where infringement of an unpublished work has commenced prior to registration, statutory damages are not available. If an infringement commences after publication of a work but prior to registration, statutory damages are available only if the copyright owner registers the work within three months after the first publication.

The availability of statutory damages is an extremely important factor in copyright litigation. First, it avoids the need for a plaintiff to prove actual damages, which are often difficult to prove. Second, by increasing the risk that a defendant will have to pay monetary damages if unsuccessful at trial, it provides a useful leverage tool for settling a dispute quickly.

C. Willful Infringement and Attorney Fees

If it is determined that a defendant had knowledge that his or her actions constituted copyright infringement, the infringement will be considered "willful" and increased damages are possible. Various other factors that may be relevant to making a willfulness determination include prior acts of copyright infringement by the defendant and defendant's failure to make payments on a licensing agreement. Up to $100,000 in statutory damages are recoverable for willful infringement. Conversely, if a defendant meets the burden of proving that he or she reasonably lacked awareness of the infringement, the court may reduce the statutory damages to $200. Criminal penalties are also possible in certain circumstances.

When registration has been timely sought, attorneys fees are recoverable to a prevailing plaintiff in a copyright infringement case, in the discretion of the court,. Various factors may be considered in determining whether an award is appropriate, including for example, the objective unreasonableness of the defendant. Attorney's fees also are available to a prevailing defendant. The award of attorney's fees is subject to only a limited review by appeals court, thereby granting the trial court broad discretion to decide whether or not such an award is warranted.

The attorney's fees provision of the Copyright Act is an important factor in copyright litigation strategy and provides leverage for settling a suit early. Unlike in most types of lawsuits, an unsuccessful party in a copyright infringement risks being saddled with these fees, regardless of any showing of damage. Further, the provision allows a defendant to recover attorney's fees as a "prevailing party" and therefore penalizes plaintiffs who bring copyright infringement claims without a good faith basis.

D. Remedies under the Digital Millennium Copyright Act

For actions authorized under the recently enacted Digital Millennium Copyright Act (DMCA), there are certain separate remedies that may apply. These overlap somewhat with the traditional remedies available for all cases of copyright infringement. But there are some important differences. For example, prior registration of the copyrighted work--required to obtain attorney's fees and statutory damages in typical copyright cases--is not required for cases brought under the DCMA.

IV. CONCLUSION

Copyrights are important business assets. If a work qualifies for protection and is sufficiently important that a company would consider suing to protect it against infringement, copyright registration should be sought early. Copyright infringement litigation can be a costly and uncertain endeavor, but the Copyright Act offers unique incentives for bringing successful claims.